Correlation Between Principal Value and Matthews China
Can any of the company-specific risk be diversified away by investing in both Principal Value and Matthews China at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Principal Value and Matthews China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Principal Value ETF and Matthews China Discovery, you can compare the effects of market volatilities on Principal Value and Matthews China and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Principal Value with a short position of Matthews China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Principal Value and Matthews China.
Diversification Opportunities for Principal Value and Matthews China
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Principal and Matthews is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Principal Value ETF and Matthews China Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews China Discovery and Principal Value is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Principal Value ETF are associated (or correlated) with Matthews China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews China Discovery has no effect on the direction of Principal Value i.e., Principal Value and Matthews China go up and down completely randomly.
Pair Corralation between Principal Value and Matthews China
Allowing for the 90-day total investment horizon Principal Value ETF is expected to generate 0.64 times more return on investment than Matthews China. However, Principal Value ETF is 1.57 times less risky than Matthews China. It trades about 0.15 of its potential returns per unit of risk. Matthews China Discovery is currently generating about 0.05 per unit of risk. If you would invest 5,011 in Principal Value ETF on October 25, 2024 and sell it today you would earn a total of 98.00 from holding Principal Value ETF or generate 1.96% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Principal Value ETF vs. Matthews China Discovery
Performance |
Timeline |
Principal Value ETF |
Matthews China Discovery |
Principal Value and Matthews China Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Principal Value and Matthews China
The main advantage of trading using opposite Principal Value and Matthews China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Principal Value position performs unexpectedly, Matthews China can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Matthews China will offset losses from the drop in Matthews China's long position.Principal Value vs. Principal Quality ETF | Principal Value vs. First Trust Developed | Principal Value vs. First Trust Equity |
Matthews China vs. Matthews Emerging Markets | Matthews China vs. Morgan Stanley Pathway | Matthews China vs. Neuberger Berman ETF | Matthews China vs. Fidelity Small Mid Cap |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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